Social security system overhaul would help those on £50k or less

The tax review found that there was inequity in the existing social security system because people are charged at different rates and on a different basis.

Currently there are four different categories of people under the system – employed, self-employed, unemployed, and pensioners – who all pay at different rates.

The system is considered to be very complex, with a wide disparity of thousands of pounds for those on similar incomes but in different categories.

The self-employed are typically hardest hit.

A proposal emerging from the tax review is that everyone, except pensioners, should pay a personal contribution at the same rate so that the system is simpler, easier to administer, and can be made more progressive.

All contributors would get an allowance, and personal contributions would be assessed on all income.

Employers would continue to pay on earned income only, and the self-employed would pay a reduced ‘employers’ rate on their self-employed income only.

The proposed restructure also includes the removal of the upper earnings limit for employers.

This limit in Guernsey is currently set at £153,000.

In Jersey, employers pay a 2.5% rate on earnings between £50,000 and £250,000, and in the UK there is no limit on employer contributions.

Under each of the three options put forward from the tax review, social security contributions would generate more revenue, but to a varying amount.

Under option one with an income-based health tax, social security contributions would provide an extra £20m.

With option two, an 8% goods and services tax, the figure would be £2m.

And with option three, a 5% GST, social security contributions would collect an extra £17m.

Money from paid parking would be ‘inconsequential’

PAID parking has been considered and rejected as part of the States tax review because it was considered ‘inconsequential’ to the overall picture.

‘The example that the States treasurer gave was that if we were to try and raise £70m. to £75m. out of cuts that would represent getting rid of every single committee of the States, bar Education and Health,’ said Deputy Mark Helyar.

‘We can’t pay for that with paid parking, it’s just not possible, it’s peanuts in comparison.

‘Paid parking is a behavioural tax to discourage people from driving and that kind of tax naturally diminishes over time as behaviours alter, so it wouldn’t even begin to touch the sides.’